Public-sector corruption in the European Union is serious, and efforts over the past decade or so to rein it in have had limited effect: these are the sobering findings of a recent report* on anti-corruption policies in the EU. Corruption cost EU member states some €323 billion in lost tax revenue in 2010, the report says – the figure represents the revenue that EU member states would have generated that year had they been as effective in tax collection as Denmark, the best performer.

Despite unprecedented attention to the problem, success in fighting bribery and associated crimes has been sporadic. The scale of public-sector corruption is daunting, and there is no single set of instruments to prevent or prosecute it. “In the last 15 years, we have spent more on anti-corruption [measures] than at any point in history, but we have nothing to show for it,” says Alina Mungiu-Pippidi, the report’s principal author.

Another sobering finding is that “Europeanisation” – the process by which countries adopt EU laws and standards – does not necessarily improve governance, and that any effects wear off with time. “Over the years, the hope that the EU’s liberalised and harmonised markets and strong rule of law would determine the convergence of Italy, Greece, and the newer member states from the east has somewhat faded,” the report says.

Estonia and Slovenia, which joined the EU in 2004, quickly advanced to the top-performing group of EU member states in fighting graft. But the other newcomers performed disappointingly, according to the report. Romania and Bulgaria, the countries that most recently joined the EU, in 2007, are among the worst performers. That pattern might now well be repeated by Croatia, scheduled to join the EU on 1 July.

The report concludes that most progress is registered in the years before a country joins the EU, and that many countries let their anti-corruption policies slip once they have joined. That failing, however, is in no way limited to the countries that joined the EU in the past decade. The report lists Greece, Italy, Portugal and Spain as being among the backsliders – in the case of Greece and Italy to a “worrying” extent. The report’s gloomy conclusion is that “control of corruption is difficult to build and hard to sustain”.

The effect of new institutions and rules seems to fade quickly. Ruslan Stefanov, from the Centre for the Study of Democracy in Sofia, says that setting up anti-corruption institutions in response to demands from the EU is insufficient on its own. “We [Bulgaria] are probably the country in the world with the most anti-corruption legislation,” he says, acknowledging that this is not reflected in success in fighting corruption.

Cause and effect

Measuring corruption is notoriously tricky, as is establishing cause and effect. The report, undertaken with EU research funding, takes much of its data from existing reporting mechanisms, including the Corruption Perception Index compiled each year by Transparency International, a private watchdog, and the World Bank’s Control of Corruption report.

The report concedes that “tracing the progress of anti-corruption policies by sector or by country over time will remain a challenge”. Data on perception, which canvasses peoples’ views on corruption in their industry or country, has often been criticised as being slow to change in light of actual developments. (For example, a spike in corruption trials might give the impression that corruption is worsening when in fact it is being tackled more aggressively.) But the report defends the significance of data stemming from both perception and experience, especially when used together.

Causality is another difficult area. For example, there is a “significant and robust” correlation between weak anti-corruption measures and weak tax collection, the report says – although Italy’s tax collection is stronger than its poor rating for corruption would suggest, while Ireland’s is worse than its corruption-control ranking. But whether one is the cause of the other, or both are the effects of other factors, is difficult to establish.

Mungiu-Pippidi, director of the European Research Centre for Anti-Corruption and State-Building at the Hertie School of Governance in Berlin, believes that there is a vicious circle of distrust that affects tax collection. Corruption wears down trust in government institutions and increases citizens’ willingness to cheat.

Economic crisis

Whichever way the chain of causation may run, the impact is clear: while corruption impedes economic growth, weak tax collection further diminishes fiscal revenue. Moreover, both are prevalent in precisely those EU member states that have been hit hardest by the eurozone crisis.

Mungiu-Pippidi estimates that around one-third of the fiscal and economic crisis in Greece is corruption-related. Cyprus, Greece, Slovenia and Italy all have shadow economies that are bigger than the average of 31 European countries, and Portugal and Spain are just above the average, according to new figures compiled by Friedrich Schneider, an economics professor at Johannes Kepler University in Linz, Austria. In Bulgaria, the shadow economy makes up 31.2% of gross domestic product, and in Romania the figure is 28.4% (the average is 18.5%).

Despite all the difficulties, Mungiu-Pippidi believes in strong anti-corruption policies. In a sense, she suggests, prevention is far more efficient than prosecution. “It is easier to prevent [corruption] than to follow money trails across borders years later,” she says.

* “The good the bad and the ugly: controlling corruption in the European Union”, Alina Mungiu-Pippidi, March 2013.